Numerous class action suits have been brought over the past several years under the Telephone Consumer Protection Act (“TCPA”) against entities that fax unsolicited advertisements (so-called “blast faxes”) to individuals and businesses. Companies facing such suits in turn have sought insurance coverage under their comprehensive general liability (“CGL”) policies for costs incurred defending TCPA suits, and for indemnification of any liability.
Establishing the insurer’s duty to defend and indemnify is critical in such cases, because most are framed as class action suits where defense costs can mount quickly, and if liability is found, damages can be quite high.
Since insurance coverage disputes are governed by state law, whenever a new type of liability emerges in statutory or common law, results of insurance cases frequently differ dramatically state by state. Coverage disputes in blast faxing cases have yielded mixed results, but have favored policyholders in a series of decisions during the past year. Most recently, the Florida Supreme Court decided on January 28, 2010 in Penzer v. Transportation
, No. SC08-2068, 2010 WL 308043, that a standard CGL policy provided coverage for a suit brought under TCPA for alleged blast fax activities.
Although there is a clear trend in favor of coverage, insurers will likely use the lack of unanimity among courts thus far, and the potential for different results in un-tested jurisdictions, as a basis to deny claims going forward. Policyholders, however, should not take these denials at face value, but rather should push back and demand the coverage to which they are entitled.
Policyholders faced with suits for TCPA violations typically seek coverage under the “advertising injury” provisions of their CGL policies, which are written on standard forms providing coverage for liability incurred due to “publication of material that violates a person’s right of privacy.” Policyholders argue that “privacy” includes the right to seclusion, and that blast faxing claims
fall within the advertising injury coverage because those claims allegedly violate the right to seclusion by invading the recipients’ personal space.
In response, insurers assert that the “privacy” component of advertising injury coverage includes only the publication of a person’s confidential information, not invading their personal space, and that therefore blast faxing does not fall under this definition. Some courts have accepted the insurers’ argument, finding the “right of privacy” language refers only to the right to secrecy
, to keep certain information confidential) and not the right to seclusion (i.e.
, to be left alone). For example, in a case decided last year the Seventh Circuit Court of Appeals, predicting Iowa law, agreed with this line of reasoning and ruled in favor of an insurer. See Auto-Owners Ins. Co. v. Websolv Computing, Inc.
, 580 F.3d 543 (7th Cir. 2009).
, a case decided in late January 2010 by the Florida Supreme Court, the insurer argued that “read as a whole and in context, [the advertising injury clause] provides coverage only for injuries to privacy rights caused by the content of the material.” 2010 WL 308043, at *2. The U.S. District Court for the Southern District of Florida agreed with this argument and held
that there was no coverage. Id.
On appeal, the Eleventh Circuit, determining that the case rested on an unsettled issue of Florida law, certified the question to the Florida Supreme Court. The Florida Supreme Court accepted the policyholder’s position that “privacy” should be read broadly, contradicting the federal district court’s decision and setting up a reversal by the Eleventh Circuit. In doing so, the court held
that “the source of the right of privacy is the TCPA, which provides the privacy right to seclusion.” Id.
at *4. Penzer
, like other recent court decisions, indicates a landscape favorable to policyholders is developing. See Alea London Ltd. v. Am. Home Servs. Inc.
, No. 1:09-CV-158 (N.D. Ga. Dec. 1, 2009); New Century Mortg. Corp. v. Great Am. N. Ins. Co.
2009 U.S. Dist. LEXIS 100033 (D. Del. October 26, 2009); Cynosure Inc. v. St. Paul Fire & Marine Ins. Co.
, No. 1:08-cv-11210, 2009 WL 949077 (D. Mass. April 8, 2009).
While the prior decisions cited above reached favorable results for policyholders, Penzer
is the most favorable decision from a precedential perspective, because it held that the plain language of the insurance language compels coverage. Other courts finding coverage based their decisions on perceived ambiguity in the policy language, combined with the doctrine of contra preferentum
a long-standing tenet of insurance contract interpretation that requires ambiguity in policy language to be construed in favor of coverage.
Decisions finding coverage for blast faxing under standard policies are greater in number, and better reasoned, than those reaching a contrary result. Several insurers have responded to this trend by adding TCPA exclusions to their policies, tacitly conceding that a standard policy, without such an exclusion, provides coverage. Nevertheless, policyholders should not be surprised if insurers
attempt to deny such claims even under policies without an exclusion, and should be prepared to fight until their insurers provide the coverage contractually required.
Kelley Drye & Warren's Insurance Recovery Group
has extensive experience representing commercial policyholders engaged in third-party liability coverage disputes with their insurers. The group has secured coverage on behalf of clients for, among other things, asbestos, lead, environmental, and other mass tort claims;
class-action claims; first and third-party property damage claims; directors' and officers' liabilities; and residual value losses.